Rubber farmers in Thailand have blockaded roads and train tracks over the past week to pressure the government to guarantee a rubber price to bolster their incomes, as it has done for rice growers.

August 28, 2013, 11:13 a.m. ET

Thai Rubber Farmers Protest Over Prices

Roads and Rail Blockaded as Demonstrators Want Government Action to Buttress Their Incomes

WARANGKANA CHOMCHUEN

BANGKOK—Rubber farmers in Thailand have blockaded roads and train tracks over the past week to pressure the government to guarantee a rubber price to bolster their incomes, as it has done for rice growers. Hundreds of rubber farmers began gathering last weekend in the Cha-uat district of Nakhon Si Thammarat province, about 480 miles south of Bangkok, complaining the government has neglected the 60% drop in rubber prices since a record high in February 2011.Groups of farmers demanded the government ensure that raw rubber sheet fetches a price between 80 baht and 100 baht ($2.50 to $3.10) a kilogram. Rubber prices have fallen from $6.40 a kilogram two years ago to $2.40 on Wednesday. The plunge is due to weak demand from emerging markets amid a global slowdown and to a surplus of rubber.

Police and provincial officials have been negotiating with protesters, who largely have been nonviolent, to open the blockades but haven’t been successful. As of late Wednesday, no arrests of farmers had been reported.

“We don’t want to protest, but we couldn’t get the government to listen to us and talk to us otherwise,” said Preecha Kaosung, a 55-year-old rubber farmer. Mr. Preecha left his plantation last Friday and has been part of the rally ever since.

The country’s rubber policy committee on Wednesday said it would propose to the cabinet next week that it authorize 20 billion baht of loans to help the farmers. Of that total, about 5 billion baht would help farmers invest in rubber processing to add more value to the commodity and 15 billion baht would help rubber businesses upgrade machinery.

But the proposals failed to satisfy the farmers, who want the government to provide immediate relief through price guarantees for raw rubber sheet, rubber cup lump—which is a lump of raw rubber left in a cup after a tapping process—and latex at above-market prices. A network of rubber farmers nationwide said they would hold mass rallies next Monday to keep pressure on the government.

Prime Minister Yingluck Shinawatra’s administration has already spent about $18 billion to fund its controversial rice subsidy program, in which the government buys rice from local farmers at about 50% above what the grain would sell for on the global market. The program has built up at least $4.4 billion in financial losses, and a staggering 17 million tons of the rice is now in storage. That is the equivalent of two years worth of the country’s exports.

The government’s support for rice farmers, in keeping with Ms. Yingluck’s campaign promise to improve the livelihood and income of her key constituency, has inevitably encouraged other farmers to ask for help, too.

Perk Lertwangpong, president of Rubber Planter Cooperatives of Thailand, pointed out that rubber brings in more money from exports than rice, so rubber planters should get similar attention and aid from the government. The export value of natural rubber between 2010 and 2013 averaged $9.3 billion a year, compared with Thai rice at an average export value of $5.3 billion a year, statistics show.

But more Thais are employed in the rice industry. An estimated 1.2 million Thai households have someone who works on a rubber plantation, which is only about one-third of rice-farmer households, according to government data.

Thailand is the world’s largest producer and exporter of natural rubber, accounting for about one-third of world supply. The country’s rubber production has more than doubled from 1.6 million to 3.8 million metric tons in the past two decades, about 90% of which is for export.

Ms. Yingluck’s government late last year joined Indonesia and Malaysia, other big rubber-producing countries, to cut exports by a collective 300,000 tons in a bid to boost prices.

Earlier this year, the government also spent 20 billion baht to buy some 200,000 tons of rubber sheet and rubber cup lump at above market prices from local farmers. The program ended around midyear and the stockpiling failed to increase global prices.

After a meeting with government officials on Wednesday, farmer representatives were unclear whether they preferred the government resume buying rubber from them at a set price or if they wanted the state to pay them the difference between a designated support price and the market level.

Prachaya Jumpasut, managing director of the Rubber Economist Ltd., an industry consultancy, characterized government steps as counter productive. Buying rubber at above-market prices or reducing production costs by subsidizing fertilizer, a measure that the government has approved to help farmers of small plantations, will only encourage farmers to produce more, which the market can’t absorb, he said. “The increased supply will reduce the market prices and hurt the Thai natural rubber sector in a longer run,” he said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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